Correlation Between Anhui Gujing and Hangzhou Guotai

Can any of the company-specific risk be diversified away by investing in both Anhui Gujing and Hangzhou Guotai at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Anhui Gujing and Hangzhou Guotai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anhui Gujing Distillery and Hangzhou Guotai Environmental, you can compare the effects of market volatilities on Anhui Gujing and Hangzhou Guotai and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Anhui Gujing with a short position of Hangzhou Guotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Gujing and Hangzhou Guotai.

Diversification Opportunities for Anhui Gujing and Hangzhou Guotai

0.77

Correlation Coefficient

Anhui Gujing  Hangzhou Guotai

Poor diversification

The 3 months correlation between Anhui and Hangzhou is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Hangzhou Guotai Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Guotai Envi and Anhui Gujing is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Anhui Gujing Distillery are associated (or correlated) with Hangzhou Guotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Guotai Envi has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Hangzhou Guotai go up and down completely randomly.

Pair Corralation between Anhui Gujing and Hangzhou Guotai

Assuming the 90 days trading horizon Anhui Gujing Distillery is expected to under-perform the Hangzhou Guotai. In addition to that, Anhui Gujing is 1.13 times more volatile than Hangzhou Guotai Environmental. It trades about -0.22 of its total potential returns per unit of risk. Hangzhou Guotai Environmental is currently generating about 0.02 per unit of volatility. If you would invest  2,923  in Hangzhou Guotai Environmental on September 28, 2024 and sell it today you would earn a total of  19.00  from holding Hangzhou Guotai Environmental or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Anhui Gujing Distillery  vs.  Hangzhou Guotai Environmental

Anhui Gujing Distillery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Gujing Distillery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hangzhou Guotai Envi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Guotai Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hangzhou Guotai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Anhui Gujing and Hangzhou Guotai

The main advantage of trading using opposite Anhui Gujing and Hangzhou Guotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anhui Gujing position performs unexpectedly, Hangzhou Guotai can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hangzhou Guotai will offset losses from the drop in Hangzhou Guotai's long position.

The idea behind Anhui Gujing Distillery and Hangzhou Guotai Environmental pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.